During the recent rise in petrol prices in the US, the owners of filling stations in some states faced technological breakdown.
Costs were rising above $3 a gallon, but older pumps that displayed charges on a rotating dial were not wired to handle the higher prices.
When the pumps were built more than 20 years ago, no one was expecting a gallon of fuel would cost more than $2.99 within the technology’s lifetime.
To fix the problem, filling stations with the older pumps began using a concept called half-gallon pricing. If, for example, the actual price of a gallon was US $3.40, the pump would be set to half – US $1.70 a gallon. It worked, but it was hardly an elegant solution.
Unable to cope with changing market conditions, the inflexibility and inadequacies of ageing technology systems can easily cause businesses to stall.
In today’s increasingly competitive and fast moving business environment, many companies understand the crucial role that IT plays in helping them get offerings quickly to market.
In a recent study of 362 senior business and IT executives around the world by the consultancy firm Bain & Company, more than 70 per cent of respondents agreed that IT spending was essential for growth.
But if an old system isn’t performing as it should, how to go about implementing more robust, flexible technology infrastructure?
Technology analysts and strategists hold varying views about how companies should approach this issue but the majority seem to agree that scrapping a legacy system and starting again is not a good idea.
“In architecture, demolishing a building and starting again often makes more sense than refurbishing an existing structure because there’s a high degree of certainty in the end product,” says Tom Koulopoulos, president and founder of Delphi Group, a Boston technology strategy firm.
“The same cannot be said of IT. Things change so rapidly in the sector that what’s optimal today will be less so in six months time.”
There are other arguments against rebuilding technology infrastructure from the ground up. One is related to price. “For 95 per cent of companies, starting afresh is a luxury they cannot afford,” says Tom Bishop, chief technology officer of BMC software, a Texas business service management provider.
When companies do have money to spend on new IT systems, they often fall prey to the latest technology trends.
“Organisations have long chased fads – everyone’s looking for a silver bullet,” says Steve Schuckenbrock, executive vice-president of global sales client solutions with EDS. “However, there is no silver bullet, only a lot of tried and failed strategies.”
For most experts, developing quality technology infrastructure does not begin by scrapping legacy systems and starting afresh, but rather by understanding the relationship between IT and the overall strategy.
“CEOs often don’t understand that they’re not just changing their systems,” says strategist Paul Saffo of the Silicon Valley-based independent research group, Institute for the Future. “They’re changing the essence of their companies.”
Traditionally considered as a back office function, IT has moved into the foreground. IT and business strategy are no longer mutually exclusive, and strategists insist that technology projects should relate directly to business growth.
“Companies need to take a top-down approach to IT, starting out with projects that are business-critical,” says Mr Bishop.
“The first thing an organisation needs to do is understand what it is trying to accomplish,” Mr Schuckenbrock says.
Having defined goals, many strategists believe that the next step for an organisation facing an IT overhaul is to analyse the difference between the business aims and current IT capabilities.
The IT system then needs to be adjusted or overhauled to meet specific needs on a project by project basis.
According to the experts interviewed for this article, new IT projects should focus on flexibility, agility, automation, and a high degree of interface sensitivity with a view to meeting the needs of the future and responding to external market conditions.
“Systems need to be customer-oriented,” says Mr Koulopoulos. “Creating agile, component-based in-frastructure that is easy for people to use is key.”
Security is also important. “There’s no such thing as too much security,” says Mr Bishop. “But companies need to gauge how much security they need by examining how their data is managed and how likely it is to be compromised.”
For Mr Schuckenbrock, another key consideration is finding a common data structure for the entire organisation that supports the business strategy.
For companies that don’t want to find themselves outmanoeuvred by market conditions – forced, for example, to sell petrol by the half-gallon instead of the gallon – taking a gradual, business-oriented approach to IT seems to be the way to go.
“Done right, this kind of transition can help nudge an organisation into the future,” says Mr Saffo. “Done poorly, you just end up fossilising bad old business habits.”